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1CanMkt-0224Click to edit Master subtitle style
University of Western Ontario
February 4, 2013
Louis Basque, CFAMarco Larocque
Emiliano Rabinovich, CFA
This material is solely for SSgA clients and is not intended for public dissemination.Please refer to the «Important Disclosures» section for additional information found at the end of the document.
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Table of Contents
1. SSgA Firm Overview
2. Canadian Fixed Income Overview
3. Portfolio Review – University of Western Ontario Fixed Income Portfolios
4. Global Outlook
5. Global Equity Beta Solutions Overview
6. Portfolio Review – University of Western Ontario Equity Portfolios
Appendix A: Passive Currency Hedge Process
Appendix B: Biographies
Appendix C: Important Disclosures
The views expressed in this material are the views of the Canadian Fixed Income, Currency, and GSPG teams through the period ended January 31, 2013 and are subject to change based on market and other conditions. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected Past performance is not a guarantee of future results. The information contained in this document is current as of the date presented unless otherwise noted.
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CMINST-1876
SSgA Firm Overview
4
A Leading Provider of Financial Services to Institutional Investors
State StreetGlobal Advisors
A global leader in asset management
• Subsidiary of State Street Corporation, one of the world's leading providers of financial services to institutional investors, with a heritage dating back over two centuries
• Entrusted with over $2.1 trillion* CAD in assets worldwide
• Clients include governmental entities, corporations, endowments and foundations, third party asset gatherers, multi employer plans, pension funds and sovereign wealth funds
• ETF industry pioneer and leader since 1993 with $339 billion* CAD in AUM
SSgA is a global leader
in asset management relied
on by sophisticated
institutions worldwide for
their investment needs
State StreetGlobal Markets
A global leader in research and trading
State StreetGlobal Services
A global leader in asset servicing
GLSTND-0631
As of December 31, 2012* This AUM includes the assets of the SPDR Gold Trust (approx. $71.9 billion CAD as of December 31, 2012), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent.
5
Our heritage and people
SSgA Advantage
Continual investment in our asset management and client service platform results in a client-focused, solutions-driven orientation
TRUST
• Fiduciary heritage of State Street• Managing $2.08 trillion* CAD in AUM
EXPERIENCE
• 444 investment professionals• More than 2,300 employees dedicated to serving client
needs around the world
GLOBAL
• 29 global offices; 10 investment centers• 24-hour global trading capability
RESEARCH
• Dedicated asset class and credit research teams as well as the Advanced Research Center (ARC)
• 74 experienced research professionals, globally
DIVERSE
• Including active, enhanced, fundamental, passive, pure alpha and multi-asset class solution
• 178 ETFs
PRECISE
• Dedicated asset class/index exposure with advanced risk and return models
• World-class execution platform
Our process and solutions
Our perspective and commitment
As of December 31, 2012* This AUM includes the assets of the SPDR Gold Trust (approx. $71.9 billion CAD as of December 31, 2012), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent.
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Cash4
$365.6 B Equity$803.1 B
Fixed Income$308.4 BSolutions (ISG)3
$133.0 B
ETFs1
$338.6 B
All Other2
$131.4 B
SSgA — A Trusted Partner
53% 84%
$2.08 Trillion1 CAD in Assets Under Management*
Active, enhanced, fundamental, passive, pure alpha and multi-asset class solutions
*As of December 31, 20121 This AUM includes the assets of the SPDR Gold Trust (approx. $71.9 billion CAD as of December 31, 2012), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent.2 Includes Absolute Return, Commodities, Currency, Company Stock, Global Multi Strategy, Hedge Fund of Funds, Managed Futures, Private Equity and Real Estate3 Assets in Solutions are not counted in the underlying asset class4 Includes securities lending collateral, cash, and money market
SSgA clients with two or
more strategies*
Percentage of new business from existing
SSgA clients*
53% 77%
90
0
10
20
30
40
50
60
70
80
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State Street Global Advisors Canadian Operations
Peter LindleyPresident and
Head of Investments
Equities, Fund Ops & Project
ManagementJean-François Pepin
FI, Currency & AAHelen Romeo
Marina Romanelli(Montreal)
Anthony Spagnolo(Toronto)
Peter Lindley &Larry Carlson *
Client Facing
Inya Ivkovic *Chief Compliance
Officer
Eva Manimtim *Head Operations
Peter Lindley *Head of Investment
Head of Fixed Income
Denis Senecal *Lauren Caverly *
Legal
Head of CurrencyMark Abbott *
Marco Larocque(Toronto)
Client AdministrationSonia Deepchand
Randy Oswald(Toronto)
Vincent Marcoux(Montreal)
Mark Sack(Toronto)
Head of Asset Allocation
Tony Beaulac *
Head of GEBSEmiliano Rabinovich *
Data Management
Trade Administration
Interactive
Global Service Centers *
Information Technology
Updated: December 31st, 2012
Head of Active Equity
Dawn Jia *
Portfolio StrategistLouis Basque *
* Functions also report into Corporate Core Competency Centers
Portfolio StrategistSophie Mayrand *
Marilina Mastronardi *Chief of Staff
2 Offices
84 Employees
External
Paola Bello(Montreal)
Andrej Andrin(Toronto)
Legal
8
0
5
10
15
20
25
30
35
40
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012YTD
* Assets under management as of September 30, 2012† Source: Benefits Canada, November 2012‡ Please note that the sum of the asset classes will exceed the Grand Total as internal currency mandates
(where the underlying investment is managed by SSgA) are included in the currency asset class.
SSgA Canada Snapshot• 5th Largest manager of pension assets †
• Canadian presence since 1990
• 165 clients across Canada
SSgA Canada AUM Update As of September 30, 2012
Canadian Assets Under Management* Providing investment solutions for Canadian investors
$6,706 Million of Active/Enhanced $27,420 Million of Passive $3,805 Million of Cash
Asset ClassActive/Enhanced Assets
(CAD$ Million)Passive Assets (CAD$ Million)
Equity 750 14,802
Fixed Income 3,981 3,913
Cash 3,805 —
Currency ‡ 2,235 9,466
Asset Allocation 207 755
Grand Total 10,511 27,420
Total Funds Under Management AUM $37.93 Billion (CAD$)*
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Canadian Fixed Income Overview
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SSgA Canada - Fixed Income Capabilities
Active Canadian Fixed Income: – DEX Universe Bond IndexTM
– DEX Long Term Bond IndexTM
Active and Enhanced Cash
Liability Driven Strategies and Target Date Portfolios
Enhanced Canadian Fixed Income:– DEX Universe Bond IndexTM
– DEX Long Term Bond IndexTM
– DEX Short Term Bond IndexTM
Passive Canadian Fixed Income: – DEX Real Return Bond IndexTM
– DEX Long Term Government Bond IndexTM
– DEX Long Term Bond IndexTM
– DEX Universe Bond IndexTM
Fixed income capabilities include:
Passive Bonds $2.95
billion
Enhanced Bonds$4.34 billion
$11.87 Billion in Canadian Fixed Income AssetsAs of December 31, 2012
Cash Collateral$2.85 billion
Cash$1.44 billion
Customized Bonds$0.18 billion
Active Bonds$0.11 billion
Source: SSgAPCBond, a business unit of TSX Inc. Copyright © PC-Bond 2012. All rights reserved. The information contained herein may not be redistributed, sold or modified or used to create any derivative work without the prior written consent of PC-Bond.
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Mandate Allocation
Denis Senécal Active Fixed Income
Claudio Ferri Enhanced Fixed Income
Christian Hoffman, CFA All Cash mandates, Passive Fixed Income
Louis Basque, CFA Portfolio Strategist, LDI Strategies
Canadian Fixed Income and Cash: Team
As of November 27, 2012GLSTND-0685
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Team SpecialtiesName Passive Enhanced Active
Denis Senécal Sector allocation/Credit Global rates and Credit
Philippe Nolet, CFA,FRM Duration + Yield Curve Global rates
Claudio FerriDuration, Yield Curve +Provincials/agencies + credit
Global rates
Victor Grigore, CFA Credit Analysis Credit Analysis
Christian Hoffman, CFA Trading Canada + Provincials
Trading Canada + Provincials
Trading Canada + Provincials
Julien-Bastien Bouchard, CFA Trading - Credit Trading - Credit Trading - Credit
Canadian Enhanced and Active Bonds Specialties
As of November 27, 2012GLSTND-0685
Portfolio Review – University of Western Ontario Fixed Income Portfolios
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University of Western Ontario – Pension Plan Money Market Fund
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Short Term Investment Management
Objective• To provide safety of principal and a competitive yield by investing in high quality money
market instruments
Advantages• Credit
• Technology
• Size
• Disciplined Investment Process
Results• Historically strong and consistent investment performance
• Strict adherence to client guidelines
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Credit Research
• Fundamentally driven credit process– Seek to identify strengths, weaknesses, and potential upgrade/downgrade drivers– Peer group analysis
• Know what you own and where the risks are concentrated– Evaluate adequacy of information disclosure– Review legal documentation – Identify weakest link(s)– Understand stakeholders’ interests– Require supporting documentation
• Limit influence of rating agency opinions– But understand key rating factors and the impact of a downgrade
• Expect model risk
Key Tenets of SSgA’s Short Term Credit Philosophy
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UWO Canadian Short Term Investment Fund Portfolio Characteristics - Sector Distribution by Book Value as of December 31, 2012
UWO Canadian Short TermInvestment Fund
DEX 91 DayT-Bill IndexTM
Average Yield 1.27% 0.93%
Average Term 27 days 91 days
Sector Distribution by Book Value
Federal Government 21.21% 100.00%
Provincial Government 0.00% 0.00%
BA/ BDN 23.96% 0.00%
Senior Bank FRN 47.99% 0.00%
Non-Bank Corporate 0.00% 0.00%
Commercial Paper 6.68% 0.00%
ABS 0.00% 0.00%
ABCP 0.00% 0.00%
Cash 0.16% 0.00%
Source: SSgACharacteristics are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.Past performance is not a guarantee of future results.
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University of Western Ontario
Investment Summary: as of December 31, 2012
Statement of Asset Changes The following changes took place in the University of Western Ontario account for December 2012 :
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario portfolios versus the corresponding benchmarks as of December 31, 2012:
Market Value
Canadian Short Term Investment Fund $61,304,704
Total $61,304,704
Starting Balance 12/01/2012 Contributions Withdrawals
Appreciation/ (Depreciation)*
Ending Balance 12/31/2012
Canadian Short Term Investment Fund $62,296,406 $0, $(1,083,008) $91,306 $61,304,704
Total $62,296,406 $0 $(1,083,008) $91,306 $61,304,704
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years
Since Inception
Inception Date
Canadian Short Term Investment Fund 0.14% 0.25% 1.13% 1.13% 1.00% 1.52% 2.40% Dec 2003
DEX 91 DAY TBILL 0.10 0.29 1.01 1.01 0.85 1.30 2.20
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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University of Western Ontario – Pension Plan Canadian Bond Index Fund
20CanMkt-0224
• Seeks to match the risk/return parameters of the DEX Universe Bond IndexTM
• Minimize negative tracking error
• Combine a stratified sampling approach, optimization techniques and a strict credit policy to provide the core to a fixed income allocation.
Objective
Challenge
Strategy
Optimized Canadian Bond Fund Investment Philosophy and Approach
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Optimized Canadian Bond Fund
University of Western Ontario Canadian Bond Fund
DEX Universe Bond IndexTM
Average Credit Rating AA AA
Sector Weights
Federal 39.08% 41.01%
Provincial 29.96% 29.46%
Municipal 2.21% 1.71%
Corporate 28.75% 27.82%
Characteristics
Yield to Maturity 2.30% 2.30%
Modified Duration (years) 6.95 6.95
Number of Issues 763 1,210
Sector selection and portfolio structure as of December 31, 2012
Source: SSgA, PCBondmanPlease note that PCBondman provides the ratings from the 3 major rating agencies which are: S&P, Moody's, DBRSWeights are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.
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University of Western Ontario’s Pension Plan Performance Canadian Bond Fund Index – Expressed in CAD
Investment SummaryAs of December 31, 2012
Statement of Asset Changes The following changes took place in the University of Western Ontario’s Pension Plan account for the month :
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario’s Pension Plan portfolios versus the corresponding benchmarks as of December 31, 2012 :
Market Value
Optimized Canadian Bond Fund $141,606,251
Total $141,606,251
Starting Balance 12/01/12 Contributions Withdrawals
Appreciation/ (Depreciation)*
Ending Balance 12/31/12
Optimized Canadian Bond Fund $142,082,534 $0 $(293,563) $(182,720) $141,606,251
Total $142,082,534 $0 $(293,563) $(182,720) $141,606,251
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years
Since Inception
Inception Date
Optimized Canadian Bond Fund -0.13% 0.29% 3.59% 3.59% 6.62% 6.40% 6.03% Dec 2003
DEX Universe Bond IndexTM -0.13% 0.30% 3.60% 3.60% 6.64% 6.35% 6.01%
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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University of Western Ontario – Pension Plan Optimized Long Term Bond Fund
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• Seeks to match the risk/return parameters of the DEX Long-Term Overall Index
• Minimize negative tracking error
• Combine a stratified sampling approach, optimization techniques and a strict credit policy to provide the core to a long bond allocation.
Objective
Challenge
Strategy
Optimized Long Term Bond Fund Investment Philosophy and Objectives
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Optimized Canadian Long Term Bond Fund
University of Western Ontario Canadian Long Term Bond
Fund
DEX Long Term Bond IndexTM
Average Credit Rating
Sector Weights
Federal 27.48% 27.26%
Provincial 48.47% 48.45%
Municipal 1.80% 1.75%
Corporate 22.24% 22.53%
Characteristics
Yield to Maturity 3.28% 3.29%
Modified Duration (years) 14.01 14.02
Number of Issues 344 451
Sector selection and portfolio structure as of December 31, 2012
Source: SSgA, PCBondmanPlease note that PCBondman provides the ratings from the 3 major rating agencies which are: S&P, Moody's, DBRSWeights are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.
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University of Western Ontario’s Pension Plan Performance Optimized Long Term Bond Fund – Expressed in CAD
Investment SummaryAs of December 31, 2012
Statement of Asset Changes The following changes took place in the University of Western Ontario’s Pension Plan account for the month :
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario’s Pension Plan portfolios versus the corresponding benchmarks as of December 31, 2012:
Market Value
Optimized Long Term Bond Fund $34,013,255
Total $34,013,255
Starting Balance 12/01/12 Contributions Withdrawals
Appreciation/ (Depreciation)*
Ending Balance 12/31/12
Optimized Long Term Bond Fund $33,859,538 $253,347 $(133) $(99,497) $34,013,255
Total $33,859,538 $253,347 $(133) $(99,497) $34,013,255
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years
Since Inception
Inception Date
Optimized Long Term Bond Fund -0.29% 0.13% 5.19% 5.19% 11.74% 8.67% 8.51% Dec 2003
Overall Long Term Universe -0.28% 0.15% 5.21% 5.21% 11.82% 8.65% 8.48%
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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University of Western Ontario – Pension Plan Target Date and Immunized Funds
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• To provide an attractive return relative to Government of Canada Zero Coupon Bond of similar maturities while offering liquidity prior to maturity.
• Minimize deviation between expected and realized return to maturity by minimizing reinvestment risk.
• Combining valuation techniques with trading skills to structure a series of Federal and Provincial strip bond portfolios
Objective
Challenge
Strategy
Target Date Fund Investment Philosophy and Objectives
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Target Date Fund Strategy Portfolio Characteristics: Market Value Basis – As of December 31st, 2012
Fund Duration(years)
Benchmark* Duration(years)
FundYield %
Benchmark* Yield %
Fund Convexity(years)
Benchmark* Convexity(years)
June 1, 2014 Target Date Fund 1.48 1.41 1.42 1.18 0.03 0.03
June 1, 2016 Target Date Fund 3.46 3.39 1.79 1.39 0.14 0.13
June 1, 2018 Target Date Fund 5.41 5.38 2.09 1.57 0.32 0.32
Immunized Pension Fund for Administrative Staff 5.54 1.90 0.80
Immunized Pension Fund for Academic Staff 5.31 1.86 0.80
University of Western Ontario’s Pension Plan Characteristics
*Custom benchmark
The "Custom Benchmark" is created by SSgA and may be different for different accounts. For additional information regarding these benchmarks please contact your Investment Officer.
Past performance is not a guarantee of future results. Characteristics and sector weightings are as of the date indicated and subject to change.
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University of Western Ontario’s Pension Plan Performance Target Date Funds – Expressed in CAD
Investment SummaryAs of December 31, 2012
Statement of Asset Changes The following changes took place in the University of Western Ontario’s Pension Plan account for the month :
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario’s Pension Plan portfolios versus the corresponding benchmarks as of December 31, 2012:
Market Value
Target Date Fund 2014 $26,154,294
Target Date Fund 2016 $20,666,400
Target Date Fund 2018 $11,816,207
Total $58,636,901
Starting Balance 12/01/12 Contributions Withdrawals
Appreciation/ (Depreciation)*
Ending Balance 12/31/12
Target Date Fund 2014 $26,113,888 $26,786 $0 $13,621 $26,154,294
Target Date Fund 2016 $20,556,417 $110,079 $0 $(96) $20,666,400
Target Date Fund 2018 $11,219,879 $607,946 $0 $(11,619) $11,816,207
Total $57,890,184 $744,811 $0 $1,906 $58,636,901
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years
Since Inception
Inception Date
Target Date Fund 2014 0.05% 0.36% 1.35% 1.35% 4.14% N/A 4.99% June 2008
Target Date Fund 2016 0.00% 0.29% 1.86% 1.86% N/A N/A 7.04% June 2010
Target Date Fund 2018 -0.10% 0.37% N/A N/A N/A N/A 1.75% June 2012
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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University of Western Ontario’s Pension Plan Performance Immunized Bond Funds – Expressed in CAD
Investment SummaryAs of December 31, 2012
Statement of Asset Changes The following changes took place in the University of Western Ontario’s Pension Plan account for the month :
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario’s Pension Plan portfolios versus the corresponding benchmarks as of December 31, 2012:
Market Value
Immunized Bond Fund UWLG $3,906,133
Immunized Bond Fund UWO36 $1,686,683
Total $5,592,816
Starting Balance 12/01/12 Contributions Withdrawals
Appreciation/ (Depreciation)*
Ending Balance 12/31/12
Immunized Bond Fund UWLG $3,952,715 $0 $(43,957) $(2,625) $3,906,133
Immunized Bond Fund UWO36 $1,704,522 $0 $(16,643) $(1,197) $1,686,683
Total $5,657,237 $0 $(60,600) $(3,822) $5,592,816
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years
Since Inception
Inception Date
Immunized Bond Fund UWLG -0.07% 0.36% 2.62% 2.62% N/A N/A 5.38% Jul 2010
Immunized Bond Fund UWO36 -0.07% 0.37% 2.72% 2.72% 6.15% 5.73% 5.42% Oct 2006
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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University of Western Ontario – Operating and Endowment Enhanced Canadian Universe Bond Fund
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Enhanced Canadian Bond Strategy: Philosophy and Objective
• Seek to exceed the return of the DEX Universe, Long or Short Term Overall Bond IndexTM by 15 basis points annually, over a full economic cycle, while targeting 20 basis points of forward looking tracking error
Performance Objective
The above targets are estimates based on certain assumptions and analysis made by SSgA.There is no guarantee that the estimates will be achieved.
Philosophy
• We believe the Fixed Income markets offer broad and global investment opportunities that could be exploited using a fundamentally driven approach
• By focusing simultaneously on multiple alpha sources, we seek to optimize value within a rigorously and intelligently managed risk environment, using both top-down and bottom-up processes
• We believe in a team approach driven by specialists with broad accountability
• We are managing the benchmark through a robust, tested through time, sampling process
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Enhanced Canadian Universe Bond Fund
Enhanced Canadian Universe Bond Fund
DEX Universe Bond IndexTM
Average Credit Rating AA AA
Market value basis
Federal 44.67% 41.01%
Provincial 26.30% 29.46%
Municipal 3.10% 1.71%
Corporate 25.93% 27.82%
Contribution to duration by sector
Federal 2.52 years 2.36 years
Provincial 2.64 years 2.80 years
Municipal 0.24 year 0.14 year
Corporate 1.59 years 1.66 years
Total Duration 6.99 years 6.95 years
Sector selection and portfolio structure as of December 31, 2012
Source: SSgA, PCBondmanPlease note that PCBondman provides the ratings from the 3 major rating agencies which are: S&P, Moody's, DBRSWeights are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.The above information is considered supplemental to the GIPS® presentation for this Composite, which can be found in the Appendix or was previously presented. A GIPS® presentation is also available upon request.
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Enhanced Canadian Universe Bond Fund
Enhanced Canadian Universe Bond Fund
DEX Universe Bond IndexTM
Yield to maturity 2.28% 2.30%
Modified duration 6.99 years 6.95 years
Convexity 1.01 0.99
Number of issues 698 1,210
Sector characteristics as of December 31, 2012
Source: SSgACharacteristics are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.The above information is considered supplemental to the GIPS® presentation for this Composite, which can be found in the Appendix or was previously presented. A GIPS® presentation is also available upon request.Past performance is not a guarantee of future results.
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University of Western Ontario’s Operating and Endowment Fund Enhanced Canadian Universe Bond Fund – Expressed in CAD
Investment SummaryAs of December 31, 2012
Statement of Asset Changes The following changes took place in the University of Western Ontario’s Operating and Endowment account for the month :
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario’s Operating and Endowment portfolios versus the corresponding benchmarks as of December 31, 2012:
Market Value
SSgA Enhanced Canadian Universe Bond Fund $133,184,771
Total $133,184,771
Starting Balance 12/01/12 Contributions Withdrawals
Appreciation/ (Depreciation)*
Ending Balance 12/31/12
SSgA Enhanced Canadian Universe Bond Fund
$133,339,199 $976 $0 $(155,404) $133,184,771
Total $133,339,199 $976 $0 $(155,404) $133,184,771
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years
Since Inception
Inception Date
SSgA Enhanced Canadian Universe Bond Fund
-0.12% 0.30% 3.56% 3.56% 6.59% 6.47% 5.81% Feb 2005
DEX Universe Bond Index -0.13% 0.30% 3.60% 3.60% 6.64% 6.34% 5.67%
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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Global Outlook
First Quarter 2013
From the Active Global Fixed Income Group
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Macro-Economic Themes
Global Themes
• Global growth remains challenged, but outlook in developed markets is now more balanced around the consensus.
• Ultra accommodative monetary policy continues to reduce downside risks and drives lower volatility environment.
• Backdrop for spread sectors continues to be supportive, but increased focus required on corporate fundamentals and idiosyncratic factors.
• Emerging market debt supported by slower growth, subdued inflation and relatively sound fiscal positions.
• FX returns to be driven increasingly by relative fundamentals and fiscal outlook rather than risk environment. FX carry attractive.
GLSTN
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Macro-Economic Themes
US – Fiscal headwinds pose economic risks, but Fed continues to support markets
ECB actions have greatly reduced tail risks – generating growth still a significant challenge
• Fiscal drag is currently expected to be slightly more than 1% for 2013. Continuing uncertainty could dampen upside to growth, particularly with a likely near term contentious debt ceiling debate.
• With some clarity around tax increases, there is potential for a pick-up in business spending. Combined with positive momentum in housing activity, the prospect for GDP growth to be near 2% remains our base case.
• Although corporate fundamentals have indicated some deterioration, 2% growth will continue to be supportive of credit
• While current accommodative Fed policy and open ended asset purchases are supportive of spread sectors, we expect swings in risk appetite based on shifting market expectations for QE.
• Ten-year break-evens near 2.5% generally reflect the prospect of continued QE. Potential uncertainty around the end of QE presents modest downside risk to TIPS break-evens.
• Potential investor demand significantly greater than supply which could drive spreads tighter than otherwise warranted by fundamentals.
• Generating economic growth may continue to be a struggle in the Euro zone, though expectations have fallen to very low levels – growth prospects now more balanced around flat consensus expectations for 2013
• Overall policy stance to become more accommodative – reduced fiscal austerity, increased easing of monetary conditions
• Event risk poses less of a systemic threat, with market volatility likely to be more short lived
• Due to ECB backstops, peripheral bond markets offer value in short/intermediate maturities.
• Core bond yields price in poor economic outlook – while well supported by near term policy settings, bunds don’t offer great value from medium term perspective
• Credit markets seem relatively well supported by on-going demand for yield. Driving forces are shifting away from sovereign risk and back towards fundamentals
QE = Quantitative EasingTIPS = Treasury Inflation Protected Securities
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Macro-Economic Themes
Asian rebound expected but sustainability dependent on global environment and need for Chinese reform
Japan – Growth to disappoint in 2013 driven by weak consumer demand and increase in savings
• Asian bonds are increasingly becoming part of global investors’ core allocation, lowering volatility and driving valuations.
• Greater focus on idiosyncratic factors between Asian sovereigns will create opportunities for differentiation between markets.
• Inflation in most Asian countries will remain benign in the first quarter with risks on the upside later in the year.
• In 2013, China will witness a cyclical rebound boosted by supportive monetary policy and targeted fiscal measures. China’s structural slowdown may continue and carries downside risks.
• The need for reforms in China is becoming pressing. Growth sustainability will become challenged without accelerating and deepening reforms.
• LDP election victory will be a setback to Japanese fiscal consolidation efforts.
• Japanese sovereign risk will not likely be a source of systemic risk in 2013. Fiscal challenges will continue to be mitigated by increasing savings, low foreign holdings of JGBs, increasing domestic bank JGB holdings.
• More dovish policy stance is likely to see an adjustment of inflation target and the BoJ to increase and broaden quantitative easing, although the effects on the deeply entrenched deflation will continue to be mild.
• Policies of new government are likely to include clear attempts to weaken the JPY. Potential for meaningful JPY weakness to develop
• Corporate Japan will continue to face difficulties, given its relative lack of innovation, lack of flexibility and intense competition. A weaker Yen can offset some of that loss in competitiveness.
GLSTN
D-0730
41
Macro-Economic Themes
Emerging Markets to continue to benefit from supportive flows
• Slower growth and material room for central banks to manoeuver will keep rates low across EM, with scope for further cuts in certain markets.
• Given developed markets on hold, EM countries will try to avoid local currency appreciation, supressing official rates. Continues to support flows into EM debt.
• Favour exposure to more diversified economies within EM rather than those heavily reliant on commodity exports.
• Inflation will be heading lower but some temporary hikes in headline inflation could be felt because of food prices. Wage growth is to be watched carefully in Brazil and China.
• Slowdown in EM is cyclical, not structural as in some developed markets, leading to material potential for recovery in EM by late 2013.
• Due to structural imbalances in particular EM markets, a more prolonged global slowdown would raise local recession risks.
GLSTN
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42
Global growth still challenged but expectations now more reasonable• The backdrop for global growth remains
constrained as fiscal retrenchment continues as a theme that will likely be with us for years to come. However, there has been increased acknowledgement from policymakers over recent months that austerity alone cannot be the cure for indebted nations.
• Risks remain around the growth outlook, with mild recession or sub-par performance at best expected in the major markets, but some of the major concerns around growth have abated somewhat recently. The worst potential outcomes around the US fiscal cliff appear to have been avoided for now and austerity in the Euro area may not be as severe in 2013 as in 2012. Following the leadership transition in November, concerns over a hard landing in China have also lessened.
• Market expectations for growth in the major developed markets have been revised down considerably over the past year to the point where we now feel the risks are more balanced around the consensus.
Indicators still point to subdued growth
But expectations have been revised downwards
2013 Consensus GDP Forecasts – Bloomberg
Source: Bloomberg
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43
Accommodative policy driving lower volatility environment
-
Policy actions suppressing broad market volatility
Central bank balance sheet expansion (% GDP)
Source: Citigroup
• On-going central bank accommodation and abundant liquidity conditions continue to be a key driving force of markets. Actions of the major central banks in balance sheet expansion, liquidity provision and promised back-stops have had the effect of reducing the perceived downside for risky assets.
• Volatility measures across multiple asset classes have also been suppressed, attracting strong investment flows in the current low yield environment.
• This reduced risk environment is likely to continue while official support is maintained. Spread markets have performed strongly over the past year but seem well supported by the on-going demand for yield. Caution is required as particular sectors/markets reach overvalued levels with increased focus required on fundamentals and idiosyncratic factors.
GLSTN
D-0730
Past performance is not a guarantee of future results.
44
Canada Economic Outlook
Growth outlook being impaired by external environment
Little pressure for BOC hikes due to lower inflation
• The Canadian economy is slowing due to the challenged US economic recovery and the Asian slowdown.
• We expect GDP growth for 2013 to be near 1.5% with the decline in Asia’s economy presenting the major risk to the growth outlook.
• Headline inflation is well below the Bank of Canada’s 2% target and should remain as such. Core CPI is moderating.
• The Bank of Canada has adopted a neutral stance focusing on global developments over domestic issues. The market is still expecting a lean towards a “tightening bias”.
• The market is pricing in little change to policy. If growth persists below potential, we expect a rate cut.
BOC = Bank of Canada
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Canada Market Outlook
• Duration — Canadian 10yr yields have maintained the trading ranges between 1.70% - 1.90% as was expected in Q4. We are expecting rates to maintain this pattern in the next few months with pressure on yields to the downside, mainly due to the ongoing Global pressures (U.S. and Euro).
• Provincial Bonds — Provincial issuers continue to tap the market for funding in order to take advantage of historically low rates. Although fiscal management has been in line, the provinces still face headwinds from the global forces that have been in play in the last few years. We currently hold a slightly short bias but may look to take a long stance if Provincial Bonds continue to cheapen vs. Corporate Credit.
• Corporate Bonds — As spreads have tightened in the last few months due to strong fundamentals, the appetite for credit continues to fade. Corporate credit has become expensive relative to provincial bond spreads. We will continue to maintain a short position in corporate credit.
Canadian government yields remain in low range
Provincial bonds trading at tight levels despite headwinds
GLSTN
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46
Global Government Yields
• We expect global bonds to remain expensive in the coming quarters. The risk is skewed towards higher yields because the Euro zone crisis is no longer acute and because global growth is likely to be moderately higher than in 2012. That said, any selloff is likely to be limited given the many risks facing the global economy and the significant accommodation provided by central banks.
• With policy rates set to remain “low for long”, our preference is to earn carry and roll-down in the 3y-5y segment of the curve in most markets.
• The outlook for growth is better in the US than in Europe and US bonds may underperform their main European counterparts after the US Fiscal policy outlook is clarified. Within the Euro zone we are overweight peripherals because of the policy support from the ECB.
The Fed is likely to keep rates on hold in 2013
Bonds remain expensive
Source: SSgA, Bloomberg: Dec-12
Source: SSgA, Bloomberg: Dec-12
GLSTN
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Past performance is not a guarantee of future results.
Global Equity Beta Solutions Overview
Investing involves risk including the risk of loss of principal.
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Philosophy and Competitive Advantages
How we strive to do it better• Experienced, tenured team of portfolio managers
– GEBS team in seven investment centers worldwide– Market-leading infrastructure and proprietary portfolio
construction tools
• Size and scale– Significant asset base and economies of scale– Substantial liquidity and diversity of client
accounts (flows)
• Modular approach to product lineup– Flexible, customizable solutions– Breadth of commingled funds available
• Innovative, client-tailored solutions– Traditional beta, ETFs, rules-based and factor tilted
indexing strategies– Strong, proprietary research capability
Total Team Assets Under Management$956 Billion (USD) as of September 30, 2012
Emerging Markets Equity$57,463 M
International and Global Equity$385,037 M
US Equity$513,488 M
What we do• Seek to deliver returns that our clients want and expect at the lowest possible implementation cost
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Global Equity Beta Solutions
The GEBS Tool Kit
Global Trading – 27 global Traders
Operations – 100+ Dedicated Professionals
Data Group – 13 Dedicated Professionals
Relationship with State Street Corporation
As of December 31, 2012* Does not manage moneyCertified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the US, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
GLSTND-0580
Susan DarrochAPAC ex-Japan
Sydney
David ChaiHong Kong
Nobuya Endo, CFA Tokyo
Mike Feehily, CFAJohn Tucker, CFA
North America
David Arrighini, CFANorth America
TEMC
Eric Brandhorst, CFA*Head of Research
Lynn Blake, CFAGlobal CIO, Global Equity Beta Solutions
Chris McKnett* Head of ESG
Portfolio Specialists
Montreal
Portfolio Strategists
Bertrand GouezFrederic Jamet
Paris
Richard Hannam,ASIPEMEA
Natalie WallerLondon
Sungsu Ahn*Systems
Kristoffer BirchAndrew Howson
Lillian Poon
Elaine Cheung, CFAMichelle Ip
Kwok-Shing Yip, CPA
Shunsuke Ichinose, CMAMasaki Ishikawa, CFA, CMA
Hitomi Miwa
Christopher Flood, CFA, ASIPChris Handley, ASIP
Mark DaveyJames Fielding
Richard HamiltonLisa Hobart
Sanjit KhumanAlexander King, CFA
Dominic KleeDavid Lock
Matt McCarthy
Ludovic BrancourtSelim Dekali
Anne Schwartz
Emerging Market Equities Tom Coleman, CFA
Non-US Equities Dwayne Hancock, CFA
US Equities Karl Schneider, CAIA
Juan AcevedoKristin CarcioAmy ChengDavid ChinKala Croce
Ray Donofrio
Mike FinocchiPayal Gupta
Ted Janowsky, CFAMelissa Kapitulik
Mark KrivitskyChuck LeVine
Keith Richardson Amy Scofield
David Swallow, CFAEric Viliott, CFA, CFP®
Olga Winner, CFATeddy Wong
Chris Cheung, CFATaie Wang, CFA
Alex Pire*Dan TenPas*
Raluca Petrescu, CFAEmiliano Rabinovich, CFA
Sophie Mayrand, CFA, CGA*
Dan Smith*Shayne White*
Theresa Holland Executive Assistant
50
A Leading Manager of Global Indexed Assets
*As of December 31, 2011, includes 5 year GEBS institutional average of $50 B and 5 year average SSgA ETF of $21 B, updated annually.**Exclusive of Emerging Markets Equities invested in other MSCI-benchmarked strategies such as MSCI ACWI and MSCI ACWI ex US."FTSE®”, "FT-SE®” and "Footsie®” are trade marks of the Exchange and FT and are used by FTSE under license. "All-World", "All-Share", "All-Small" and "FTSE4Good" are trademarks of FTSE.All Standard & Poor's Indexes are registered trademarks of Standard & Poor's Financial Services LLC.Dow Jones and Dow Jones Indices are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by State Street Global Advisors (SSgA).Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell Indices are trademarks of Russell Investment Group.The MSCI Indexes are trademarks of MSCI Inc.
Total Assets Under Management: $956 Billion (USD) as of September 30, 2012 • An average of $72 billion in annual net new assets over past five years*• 85% of new assets derived from existing clients
S&P Indexes$368,113 M
Dow Jones/DJ IndexesSM
$21,832 M
Russell Indexes $98,451 M
MSCI $6,827 M
US TEMC$10,074 M
Other$8,191 M
US Index Assets Under Management $513,488 Million as of September 30, 2012
International and Global Equity AUM$385,037 Million as of September 30, 2012
MSCI Developed$260,891 M
Global TEMC$2,536 M
Other (Nasdaq…)
$44,608 M
S&P Developed$31,526 M
FTSE Strategies$32,087 M
Dow Jones Developed$13,389 M
S&P and S&P®/IFCI $3,569 M
MSCI Emerging Markets$44,916 M
Customized Emerging Market Indices
$7,066 M
FTSE Emerging Markets
$1,912 M
Emerging Markets Equity AUM$57,463 Million as of September 30, 2012**
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Advanced Betas and Commodities
Source: SSgA"FTSE®”, "FT-SE®” and "Footsie®” are trade marks of the Exchange and FT and are used by FTSE under license. "All-World", "All-Share", "All-Small" and "FTSE4Good" are trademarks of FTSE.Dow Jones and Dow Jones Indices are service marks of Dow Jones & Company, Inc.S&P GSCI® is a trademark of Standard & Poor's Financial Services LLC. and has been licensed for use by Goldman, Sachs & Co.S&P/IFCI Liquidity Tier EM Index is a trademark of Standard & Poor's Financial Services LLC., and has been licensed for use by State Street Bank and Trust. "Dow Jones,”“UBS”“Commodity and Long-Term Commodity IndexSM" are service marks of Dow Jones & Company, Inc. and UBS AGThe Macquarie Global Infrastructure 100 Index is a trademark of Macquarie “SPDR®” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and has been licensed for use by State Street Corporation. All Standard & Poor's Indexes are registered trademarks of Standard & Poor's Financial Services LLC.The MSCI Indexes are trademarks of MSCI Inc.
Alternative Weightings and Low Volatility EquityAssets Under Management
$38,617 Million as of September 30, 2012
Alternatives and CommoditiesAssets Under Management
$3,268 Million as of September 30, 2012
Valuation Tilted$8,045 M
MSCI Alternatively Weighted$935 M
Price Weighted$11,712 M
Equal Weighted S&P 500$998 M
RAFI$3,197 M
S&P GSCI$300 M
S&P GSCI Light Energy$122 M
DJ-UBS Commodity$502 M
S&P MLP$209 M
Emulation Strategies$524 M
Global Infrastructure$740 M
Natural Resources$870 M
Total Advanced Betas and Commodities AUM: $41,885 Million (USD) as of September 30, 2012• Rules-Based and Factor-Tilting Strategies, Low-Volatility Equity, Commodities and
Additional Alternatives
Low Volatility$1,529 M
S&P/IFCI Liquidity Tier$267 M
Global Wealth Weighted$130 M
Yield Tilted / Dividend Strategies$11,804 M
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Portfolio Management Process Overview
We define risk as under- or over-performance to the benchmark
We seek to match the returns and characteristics of an Index as closely as possible, before expenses, over the long term
Risk Management
Daily holdings reconciliation
Cash flow verification and notification
Risk Management
Review of ex-ante tracking error
Risk Management
Pre/post-trade Compliance checks
STEP 3
Timely and precise processing of information
Complete and accurate representation of
benchmark
Efficient execution of trades
Existing Portfolio
Pro-forma Index Data
STEP 1 STEP 2 STEP 4
Review of performance and trade costs analyses
Incorporation of results into portfolio construction
Risk Management
Review of ex-post tracking error
PortfolioConstruction Transactions Attribution
Analysis
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Managing index changes
• Managing risk
• Capturing index returns
• Minimizing cost
Other value-added opportunities• Stock lending
• Mergers and takeovers
• Rights issues
Intelligent Execution of Index Changes and Reconstitutions
1
2
Recognition and analysis of index changes• Detailed analysis before the index change date –
using pro-forma index files
• Size of change; sector/industry/country
• Estimated supply/demand
• Economic events/earnings releases
• Volatility/liquidity/bid-ask spread
Execution strategies• Team discussion with equity dealers to create
trading strategy
• Guarantees/averaging in/crossing/patient trading
• Post-trade analysis
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Positive Trends in Indexing
Broad Trends– Continued growth in assets, especially in non-US markets– Clients broadening passive exposure (e.g., S&P 500® to Russell 3000®, EAFE® to ACWI,
Investable Market Indices) – Tactical use of beta products to express investors’ views – The search for high yield (SPDR S&P Dividend Yield ETFs)– Convergence of methodologies across index providers
Advanced Beta and Alternative Indices– Low-volatility equity strategies (US, Global, and Emerging Markets exposure)– Rules-based and factor-tilt indexing strategies (e.g., quality, momentum, and value) – S&P Master Limited Partnerships (MLP) Index
More Focused ETFs– Industry funds, sector funds, style funds– Smaller shops opening funds with quasi-active indices, leverage, or distinct weighting schemes
Environmental, Social and Governance (ESG) Portfolios– Continued interest in divestment mandates that seek conventional benchmark returns
and characteristics– Innovative indexes constructed with positive screens (e.g., US Community Investing IndexTM, Dow
Jones Sustainability World Index)
Indexing is a vital component of equity exposure
The US Community Investing Index is a trademark of the F.B. Heron Foundation and has been licensed for use by State Street Global Advisors. The Products are not sponsored, endorsed, sold or promoted by F.B. Heron Foundation and F.B. Heron Foundation makes no representation regarding the advisability of investing in the Products.
GLSTND-0593
CanMkt-0224CMINST-1876
Portfolio Review – University of Western Ontario Equity Portfolios
56
University of Western Ontario – Pension Plans and Retirement Income Funds
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario portfolios versus the corresponding benchmarks as of December 2012:
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years Inception
Inception Date
SSgA S&P 500 Index Strategy 0.97% -0.22% 16.01% 16.01% 10.05% N/A 16.39% May 2009S&P 500 Hedged to CAD Index 0.98 -0.22 16.26 16.26 10.32 N/A 15.96Difference -0.01 0.00 -0.25 -0.25 -0.27 N/A 0.43
SSgA S&P 500 Index Strategy 0.97% -0.22% 15.97% 15.97% 10.03% N/A 11.18% Oct 2009S&P 500 Hedged to CAD Index 0.98 -0.22 16.26 16.26 10.32 N/A 11.43Difference -0.01 0.00 -0.29 -0.29 -0.29 N/A -0.25
SSgA S&P 500 Index Strategy 1.15% 0.81% 13.43% 13.43% 9.00% N/A 9.45% Oct 2009S&P 500 Index 1.15 0.81 13.43 13.43 8.98 N/A 9.43Difference 0.00 0.00 0.00 0.00 0.02 N/A 0.02
SSgA S&P Midcap 400 Index Strategy 2.25% 3.79% 17.82% 17.82% 12.51% N/A 13.25% Oct 2009S&P 400 Hedged to CAD Index 2.25 3.78 18.11 18.11 12.84 N/A 13.62Difference 0.00 0.01 -0.29 -0.29 -0.33 N/A -0.37
Statement of Asset Changes The following changes took place in the University of Western Ontario account for December 2012:
Market Value 12/01/2012 Contributions Withdrawals Change in
Market Value*Market Value
12/31/2012
SSgA S&P 500 Index Strategy $80,051,618 $0 $0 $779,205 $80,830,823
SSgA S&P 500 Index Strategy 16,328,255 46,357 0 158,926 16,533,539
SSgA S&P 500 Index Strategy 14,231,722 238,499 0 164,086 14,634,306
SSgA S&P Midcap 400 Index Strategy 11,616,306 0 0 260,881 11,877,187Total 122,227,901 284,856 0 1,363,098 123,875,855
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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University of Western Ontario – Operating and Endowment Fund
Summary of PerformanceFollowing are the gross returns for the University of Western Ontario Operating and Endowment portfolios versus the corresponding benchmarks as of December 2012:
One Month
Three Months
Year to Date
Last 12 Months
Three Years
Five Years Inception
Inception Date
SSgA S&P 500 Index Strategy 0.97% -0.22% 16.02% 16.02% 10.18% N/A 18.16% Apr 2009
S&P 500 Hedged to CAD Index 0.98 -0.22 16.26 16.26 10.32 N/A 18.27
Difference -0.01 0.00 -0.24 -0.24 -0.14 N/A -0.11
SSgA S&P Midcap 400 Index Strategy 2.24% 3.79% 17.82% 17.82% 12.62% N/A 21.97% Apr 2009
S&P 400 Hedged to CAD Index 2.25 3.78 18.11 18.11 12.84 N/A 22.23
Difference -0.01 0.01 -0.29 -0.29 -0.22 N/A -0.26
Statement of Asset Changes The following changes took place in the University of Western Ontario Operating and Endowment account for December 2012:
Market Value 12/01/2012 Contributions Withdrawals Change in
Market Value*Market Value
12/31/2012
SSgA S&P 500 Index Strategy $46,574,902 $0 $0 $452,641 $47,027,543
SSgA S&P Midcap 400 Index Strategy 22,858,027 0 0 513,038 23,371,065Total 69,423,929 0 0 965,679 70,398,608
Source: SSgA* Includes dividends, interest, and realized/unrealized gains and losses.Past performance is not a guarantee of future results.Return periods of less than one year are not annualized.Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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Global Equity Market Overview as of December 31, 2012
Source: SSgAPast performance is not a guarantee of future results. Standard & Poor's S&P Indices are registered trademarks of Standard & Poor's Financial Services LLC. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell 2000 is a trademark of Russell Investment Group. The MSCI Indexes are trademarks of MSCI, Inc. The views expressed in this material are the views of Global Equity Beta Solutions team through the period ended December 31, 2012 and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries. Investments in small-sized companies may involve greater risks than in those of larger, better known companies. Investments in mid-sized companies may involve greater risks than in those of larger, better known companies, but may be less volatile than investments in smaller companies. Investing in commodities entail significant risk and is not appropriate for all investors. Risk associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.
• Broadly rewarding fourth quarter, but less so for US stocks– Progress on financial stability in Europe and hints of perkier growth in Asia allowed global equity benchmarks to
snap back nicely from choppiness earlier in the quarter– Those focused too closely on the performance of US averages might not have noticed, as the fraught atmosphere
in Washington DC limited the upside in US shares during Q4
• Plenty of global challenges in 2012, but markets still strongly positive– 2012 ended with a compelling worldwide set of double-digit equity returns despite daunting global challenges– Major credit for the gains seems due to the aggressive policies of central banks, particularly the European Central
Bank, but also the US Federal Reserve, the Bank of England and most recently the Bank of Japan
• Prosperity across all sizes and styles, although value and mid caps performed best– Despite a 0.4% loss during the fourth quarter, the S&P 500 still posted a 16.0% annual gain– Mid cap and small cap stocks outperformed larger issues. The Russell 2000 climbed 16.4% for the year while the
S&P 400 did even better, posting a 17.9% annual return.– The Russell 1000 Growth slipped 1.3% in the fourth quarter, trimming its full 2012 gain to 15.3%. Conversely, the
Russell 1000 Value added 1.5% during the fourth quarter extending its gain for the year to 17.5%.
• Markets outside the US mirror the action in North America fairly well– The MSCI Emerging Markets Index gained a solid 5.6% in Q4, ending 2012 with a handsome 18.2% advance– The MSCI World Index of developed market equities climbed 2.5% in Q4 for an annual gain of 15.8%– The MSCI EAFE® Index came on strong during the second half of 2012. For unhedged dollar-based investors,
EAFE finished 2012 with a 17.3% gain and bested the S&P 500 by 130 basis points.
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CanMkt-0224
Portfolio Review for S&P 500® Index Strategy
CMINST-2761
Investing involves risk including the risk of loss of principal.
60
S&P 500® Index Strategy Overview
As of December 31, 2012Although some investments may exhibit certain characteristics of leverage transactions, SSgA will not borrow money or use derivatives for the S&P 500 Index Strategy in a manner that SSgA considers to have the purpose of creating investment leverage. Investments made by SSgA to hedge or reduce risk will not be considered to have been made for the purpose of creating investment leverage; SSgA generally will determine whether an investment has the effect of creating investment leverage by evaluating the effect of the investment on the exposure and risk profile of the Strategy's portfolio as a whole.Standard & Poor's S&P Indices are registered trademarks of Standard & Poor's Financial Services LLC.
Objective: Seeks to match the returns and characteristics of the S&P 500 Index as closely as practicable, before expenses
• S&P 500 Index Strategy– Replication with additive offsets– Daily openings– May use exchange traded index futures to achieve equity exposure
• S&P 500 Index: Exposure to 500 leading companies in leading industries– Large-cap equity covering about 75% of US market – Float-adjusted market capitalization – Continuous reconstitution– Five year average historical turnover: 4.2%
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Performance Analysis by Sectors as of December 31, 2012
28.82
14.72
23.89
17.70
15.33
10.76
4.58
18.31
15.01
1.31
2.46
0.55
0.06
2.95
2.05
1.22
0.56
3.86
1.62
0.64
0 5 10 15 20 25 30 35
Financials
Information Technology
Consumer Discretionary
Health Care
Industrials
Consumer Staples
Energy
Telecommunication Serv ices
Materials
Utilities
Percent
Total return 12 months ending 12/31/2012Contribution to index 12 months ending 12/31/2012
S&P 500® Index returned …15.96% over past 12 months-0.39% for 4Q 2012
Sector reporting based on MSCI/S&P Global Industry Classification Standard (GICS)Past performance is not a guarantee of future results. Performance returns for periods of less than one year are not annualized.Sectors shown are as of the date indicated and are subject to change. This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. Investors cannot invest directly in an index.Standard & Poor's (S&P) 500 is a registered trademark of Standard & Poor's Financial Services LLC.
5.93
3.69
2.10
2.72
0.06
-2.85
-1.75
-6.02
-2.74
-5.77
0.01
0.86
-0.18
0.24
0.09
-0.11
-0.20
0.36
-0.32
-1.14
-8 -6 -4 -2 0 2 4 6 8
Financials
Industrials
Consumer Discretionary
Materials
Health Care
Utilities
Consumer Staples
Telecommunication Serv ices
Energy
Information Technology
Percent
Total return 4Q 2012Contribution to index Q4 2012
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Sector Weights and Top Ten Holdings
Top ten holdings for S&P 500® Index
19.03
15.61
12.01
11.50
10.99
10.62
10.13
3.62
3.44
3.06
11.85
10.67
11.54
3.50
3.87
2.96
19.02
13.64
12.27
10.69
0 2 4 6 8 10 12 14 16 18 20
Information Technology
Financials
Health Care
Consumer Discretionary
Energy
Consumer Staples
Industrials
Materials
Utilities
Telecommunication Serv ices
Percent
12/31/2012 12/31/2011
Sector weights for S&P 500® Index
Security Name 12/31/2011 %Total 20.23Exxon Mobil Corp. 3.57Apple Inc. 3.31International Business Machines Corp. 1.90Chevron Corp. 1.86Microsoft Corp. 1.71General Electric Co. 1.66Procter & Gamble Co. 1.61AT&T Inc. 1.57Johnson & Johnson 1.57Pfizer Inc. 1.46
Security Name 12/31/2012 %Total 19.56Apple Inc. 3.93Exxon Mobil Corp. 3.10General Electric Co. 1.73Chevron Corp. 1.66International Business Machines Corp. 1.60Microsoft Corp. 1.59Johnson & Johnson 1.52AT&T Inc. 1.50Google Inc. Cl A 1.48Procter & Gamble Co. 1.46
As of December 31, 2012Sector reporting based on MSCI/S&P Global Industry Classification Standard (GICS)The holdings and sectors shown are as of the date indicated and are subject to change. This information should not be considered a recommendation to invest in any particular sector or buy or sell any security shown. It is not known whether the securities or sectors shown will be profitable in the future.Standard & Poor's (S&P) 500 is a registered trademark of Standard & Poor's Financial Services LLC.
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Top and Bottom Contributors to Performance — Q4 2012
Bottom five S&P 500 Index contributors
CompanyBegin Weight
9/30/2012End Weight 12/31/2012
Total Return (Gross of Fees)
Contribution to Return Sector
Bank of America Corp. 0.74 0.99 31.50 0.24 Financials
Citigroup Inc. 0.74 0.91 20.94 0.15 Financials
JPMorgan Chase & Co. 1.19 1.32 9.42 0.11 Financials
Ford Motor Co. 0.29 0.39 31.93 0.09 Consumer Discretionary
Visa Inc. 0.54 0.62 13.15 0.07 Information Technology
Top five S&P 500® Index contributors
CompanyBegin Weight
9/30/2012End Weight 12/31/2012
Total Return (Gross of Fees)
Contribution to Return Sector
Apple Inc. 4.86 3.95 -19.74 -0.96 Information Technology
Microsoft Corp. 1.74 1.60 -9.48 -0.17 Information Technology
AT&T Inc. 1.69 1.51 -9.54 -0.16 Telecommunication Services
Exxon Mobil Corp. 3.28 3.11 -4.75 -0.16 Energy
General Electric Co. 1.86 1.73 -6.74 -0.13 Industrials
Sector reporting based on MSCI/S&P Global Industry Classification Standard (GICS)Past performance is not a guarantee of future results. The holdings and sectors shown are as of the date indicated and are subject to change. This information should not be considered a recommendation to buy or sell any security shown.Standard & Poor's (S&P) 500 is a registered trademark of Standard & Poor's Financial Services LLC.
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20
7
15
37
4 53
10 10
3
9
38
23
96
1216
26
36
27
1613 12 11
7
0
10
20
30
40
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
S&P
500
Inde
x C
hang
es
Lack of representation Corporate actions
Index Change Analysis — S&P 500® Index
• 18 additions/deletions in 2012
• Eleven changes were due to acquisition activity and seven were due to securities being more representative of the mid-cap index (lack of representation).
As of December 31, 2012Source: Standard & Poor's®
2012 Recap
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% turnover 4.93 3.84 1.66 2.41 1.18 2.64 3.78 5.00 4.58 4.93 9.46 6.16 8.91 4.43 3.82 1.45 3.10 5.73 4.49 5.21 3.87 4.48 3.73 4.77
Index Change Analysis — Historical — S&P 500® Index
Number of changes per year and cap-weighted turnover
As of December 31, 2012Source: Standard & Poor's®
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4.37
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Index Change Analysis — 2012 — S&P 500® Index
As of December 31, 2012Source: Standard & Poor's®
The information contained above is for illustrative purposes only. None of the information contained herein constitutes a recommendation by SSgA or a solicitation of any other offer to buy or sell any securities. The information is not intended to provide investment advice. SSgA does not guarantee the suitability or potential value of any particular investment.
Date Additions Deletions Reasons for Deletion
1/3/2012 WPX Energy Inc. Compuware Corp Lack of Representation
3/14/2012 Crown Castle Intl Corp Constellation Energy Group Corporate Action
4/4/2012 Fossil Inc Medco Health Solutions Inc Corporate Action
5/1/2012 Phillips 66 Supervalu Inc Lack of Representation
5/25/2012 Kinder Morgan Inc El Paso Corp Corporate Action
5/25/2012 Alexion Pharmaceuticals Motorola Mobility Holdings Inc. Corporate Action
6/4/2012 Lam Research Corp. Novellus Systems Inc. Corporate Action
6/28/2012 Monster Beverage Corp. Sara Lee Corporate Action
6/29/2012 Seagate Technology Progress Energy Inc. Corporate Action
7/31/2012 Ensco PLC Goodrich Corp. Corporate Action
9/5/2012 LyondellBasell Industries NV Sears Holdings Corp. Lack of Representation
10/1/2012 Pentair Ltd. DeVry Inc Lack of Representation
10/1/2012 The ADT Corp. Lexmark International Inc Lack of Representation
10/2/2012 Kraft Foods Group Inc. Alpha Natural Resources Lack of Representation
10/5/2012 PETsMART Inc Sunoco Inc Corporate Action
12/3/2012 Dollar General Corp Cooper Industries Plc Corporate Action
12/12/2012 Garmin Ltd Donnelley, R.R. & Sons Lack of Representation
12/24/2012 Delphi Automotive PLC Titanium Metals Corp Corporate Action
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Portfolio Review for S&P MidCap 400™ Index Strategy
Investments in mid-sized companies may involve greater risks than in those of larger, better known companies, but may be less volatile than investments in smaller companies. Investing involves risk including the risk of loss of principal.
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S&P MidCap 400™ Index Strategy Overview
As of December 31, 2012Although some investments may exhibit certain characteristics of leverage transactions, SSgA will not borrow money or use derivatives for the S&P MidCap 400 Index Strategy in a manner that SSgA considers to have the purpose of creating investment leverage. Investments made by SSgA to hedge or reduce risk will not be considered to have been made for the purpose of creating investment leverage; SSgA generally will determine whether an investment has the effect of creating investment leverage by evaluating the effect of the investment on the exposure and risk profile of the Strategy's portfolio as a whole.S&P Midcap 400TM Index is a trademark of Standard & Poor’s Financial Services LLC. and has been licensed for use by State Street Bank and Trust Company. The strategy is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the strategy.
Objective: Seeks to match the returns and characteristics of the S&P MidCap 400 Index as closely as practicable, before expenses
• S&P MidCap 400 Index Strategy– Replication with additive offsets– Daily openings– May use exchange traded index futures to achieve equity exposure
• S&P MidCap 400 Index– Mid-cap equity representing approximately 7% of the investable US equity market– Float-adjusted market capitalization – Continuous reconstitution– Five year average historical turnover: 12.8%
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Performance Analysis by Sectors as of December 31, 2012
10.25
13.53
6.54
1.90
2.45
1.71
3.98
-0.58
-6.61
-1.51-0.16
-0.04
0.47
-0.03
0.24
0.39
0.45
0.23
1.68
0.37
-10 -5 0 5 10 15
Industrials
Consumer Staples
Materials
Financials
Information Technology
Consumer Discretionary
Energy
Utilities
Telecommunication Serv ices
Health Care
Percent
Total return 4Q 2012Contribution to index Q4 2012
17.75
21.88
22.78
26.75
15.20
22.34
16.57
5.47
-0.01
15.29
3.73
3.53
2.95
2.64
2.41
1.57
0.62
0.27
0.09
0.08
-5 0 5 10 15 20 25 30
Financials
Industrials
Consumer Discretionary
Health Care
Information Technology
Materials
Consumer Staples
Utilities
Energy
Telecommunication Serv ices
PercentTotal return 12 months ending 12/31/2012Contribution to index 12 months ending 12/31/2012
S&P MidCap 400TM Index returned …17.89% over past 12 months3.62% for 4Q 2012
Source: FactSetSector reporting based on MSCI/S&P Global Industry Classification Standard (GICS)Past performance is not a guarantee of future results.Sectors shown are as of the date indicated and are subject to change. This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. Investors cannot invest directly in an index. Standard & Poor's (S&P) MidCap 400 is a registered trademark of Standard & Poor's Financial Services LLC.
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Sector Weights and Top Ten Holdings
Top Ten Holdings for S&P MidCap 400 Index
21.93
17.34
15.51
13.30
9.39
7.22
6.08
4.90
3.82
0.51
16.65
15.21
13.01
10.08
6.77
7.02
5.88
4.24
0.50
20.63
0 5 10 15 20 25
Financials
Industrials
Information Technology
Consumer Discretionary
Health Care
Materials
Energy
Utilities
Consumer Staples
Telecommunication Serv ices
Percent
12/31/2012 12/31/2011
Sector Weights for S&P MidCap 400 Index
Security Name 12/31/2011 %Total 6.15Kansas City Southern 0.71Hansen Natural Corp. 0.67Vertex Pharmaceuticals Inc. 0.66Ametek Inc. 0.64Macerich Co. 0.64Church & Dwight Co. 0.62Green Mountain Coffee Roasters Inc. 0.56Henry Schein Inc. 0.56Federal Realty Investment Trust 0.55SL Green Realty Corp. 0.55
Security Name 12/31/2012 %Total 7.68Regeneron Pharmaceuticals Inc. 1.08Equinix Inc. 0.84HollyFrontier Corp. 0.79Kansas City Southern 0.77Ametek Inc. 0.77Vertex Pharmaceuticals Inc. 0.76Rackspace Hosting Inc. 0.68Macerich Co. 0.67PVH Corp. 0.66Trimble Navigation Ltd. 0.63
As of December 31, 2012Source: FactSetSector reporting based on MSCI/S&P Global Industry Classification Standard (GICS)The holdings and sectors shown are as of the date indicated and are subject to change. This information should not be considered a recommendation to invest in any particular sector or buy or sell any security shown. It is not known whether the securities or sectors shown will be profitable in the future.Standard & Poor's (S&P) MidCap 400 is a registered trademark of Standard & Poor's Financial Services LLC.
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Appendix A: Passive Currency Hedge Process
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Currency Hedging Program: Portfolio Construction Process
• Define the benchmark – Hedged 100% to the Canadian dollar– Reflect actual risk exposure – SSgA Currency Team gathers the information from the asset manager.– Determine what currency pairs will be used and their weights in the basket
• Use asset value subject to currency risk at beginning of month
• Allocate respective currency weights to asset value
• Trading at the end of the month, WM\Reuters mid-rate 11AM
73
Mechanics of Hedging
• Step 1: Periodic Adjustment to Hedges– Portfolio managers receive updated currency exposures from the client/custodian on the last day
of each month: valuations are usually based on previous day’s prices– Portfolio managers calculate the target hedges and re-balancing trades on the last day of
the month – Hedges are adjusted each month, or more or less frequently, depending on requirements
• Step 2: Rolling Forward Contracts– Forward contracts are typically closed 7-10 business days prior to the settlement date and
identical forwards are opened to a new distant date– Closing the near date forward contracts locks in the hedging gains/losses that will be realized on
settlement date
• Step 3: Cash Flow Notification– Trading Operations Group reconciles all upcoming cash transfers with counterparty banks and
notifies custodians of exact cash wire instructions– Client notification generally occurs 4-7 business days prior to settlement date
• Step 4: Post-Process Reconciliation– Portfolio managers review all the portfolios before and after trades have been executed and
forward contracts have been rolled
Risk Managed Hedging Process: each stage is monitored by SSgA’s Independent Risk Group
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Trading Process
Portfolio Management Group
• Step 1: Generate and Submit Trades– Portfolio managers monitor passive constraints daily– Portfolio managers use SSgA’s proprietary Currency Online (COL) portfolio management system to automatically
generate trades – Trades are electronically submitted to trading group via Trade Portal order management system
Currency Trading Group
• Step 2: Execute Trades– All trades must be authorized with two signatures prior to execution– Trader receives trades in the Trade Portal proprietary currency order management system and executes via the
FX Connect® multi bank electronic trading platform
Currency Trading Operations Group
• Step 3: Confirm Trades– Currency trading operations group electronically confirms all trade details via Trade Portal and FX Connect®
• Step 4: Notify Client/Custodian of all trades– Trading Operations Group electronically notifies client’s custodian of each trade via SWIFT messages
Specialist teams minimize operational risks
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Appendix B: Biographies
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Biographies
Louis is a Vice President of State Street Global Advisors and a Senior Product Engineer for State Street Global Advisors, Ltd. (Canada). He is currently responsible for product development, research and marketing of SSgA's products, focusing on Fixed Income and Asset Allocation Strategies. His responsibilities include the development and implementation of customized Fixed Income and Liability Driven solutions. He was previously a portfolio manager in the Canadian Fixed Income Team, managing structured Fixed Income portfolios, Short Term and Liability Driven strategies.
Prior to joining SSgA, Louis was Vice President of Regional Sales at Synergy Asset Management where he acted as lead sales executive for the province of Quebec, servicing investment dealers. Prior to working at Synergy Asset Management, Louis worked at the Trust Company of Bank of Montreal as Senior Manager, Investments. He began his investment career in 1993.
Louis is a graduate of the Université du Québec à Montréal. He has earned the Chartered Financial Analyst designation and is a member of the Montreal CFA Society and the CFA Institute.
Louis C. Basque , CFA
Marco is a Vice President of State Street Global Advisors Ltd., (Canada). He is responsible for maintaining client service relationships. Prior to joining the Toronto office, he was an Investment Services Manager in the SSgA offices of London, England responsible for the accounting and performance measurement of balanced mandates. Prior to London, Marco was the Assistant Director of Operations in Montreal. Marco first joined SSgA Montreal in 1995 as an investment accountant.
Marco obtained his Bachelor of Commerce with a Major in Accountancy from Concordia University and has earned the Certified Management Accountant designation.
Tel: 647-775-5849
E-mail: [email protected]
Marco Larocque
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Emiliano is a Vice President of State Street Global Advisors, Ltd. and Head of the Canadian Passive Equities Team. He leads a team of portfolio managers that are involved in the passive and synthetic management of international and North American index portfolios, research and product development. He joined the company in 2006. Prior to this he was the Director of Business Development for PerOs Systems Technologies and has over 5 years experience as a financial analyst.
Emiliano holds a BA in Economics from the University of Buenos Aires and a Master of Arts in Economics from the University of CEMA. He has also earned the CFA Designation and is a member of the Montreal CFA Society.
Emiliano Rabinovich, CFA
Appendix C: GIPS® Presentations and Important Disclosures
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Important Disclosures
Investing involves risk including the risk of loss of principal.
There are a number of risks associated with futures investing including but not limited to counterparty credit risk, currency risk, derivatives risk, foreign issuer exposure risk, sector concentration risk, leveraging and liquidity risks.
Derivative investments may involve risks such as potential illiquidity of the markets and additional risk of loss of principal.
This document provides summary information regarding the Strategy. This document should be read in conjunction with the Strategy's Disclosure Document, which is available from SSgA. The Strategy Disclosure Document contains important information about the Strategy, including a description of a number of risks.
Risk associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.
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